How do you measure investment risk?

Ren
- September 02, 2015 07:31

Investment risk is the risk that your investments could go down in value.

We measure risk by looking at how stable investment returns have been in the past. For example, an investment of $100 whose value fluctuated between $90 and $110 over the course of the year is riskier than an investment whose value fluctuated between $95 and $105. More importantly, we also look at how different assets move at the same time — that's how diversification lowers the riskiness of your portfolio.